A simple macro‐model of COVID‐19 with special reference to India

Motivated by the prevailing severe situation in India, we extend the SIR(S) model of infectious diseases to incorporate demand dynamics and its interaction with COVID‐19 spread. We argue that, on one hand, the spread of COVID‐19 creates panic among consumers and firms and negatively affects economic activity. On the other hand, economic activity intensifies the spread of the infection. Initially assuming that recovered individuals do not develop antibodies and become susceptible again, we capture the interaction between economic activity and the spread of the disease in a two‐dimensional dynamical system. We show that a large fiscal expansion combined with measures to boost community health and improve the health sector's capacity to provide critical care can simultaneously improve the economy and control the spread of the disease. Finally, assuming that only a fraction of recovered individuals become susceptible to contracting the diseases again, we obtain richer dynamics in a three‐dimensional dynamical system. This paper also highlights the important role of infection rates and the recovery rate in determining the uniqueness and the stability properties of steady state.